JACKSONVILLE, Fla.--(BUSINESS WIRE)--Oct. 28, 2004--Rayonier (NYSE:RYN) today reported third quarter net income of $24.2 million, or 47 cents per share. This compared to $43.7 million, or 86 cents per share, in second quarter 2004 and $8.1 million, or 19 cents per share, in third quarter 2003. Third quarter 2004 results include tax benefits from a like-kind exchange (LKE) transaction of $10 million, or 20 cents per share, while last year's quarter was impacted $3.3 million, or 8 cents per share, by costs associated with the company's conversion to a real estate investment trust (REIT).
Earnings were below second quarter primarily due to lower land sales, as expected, and reduced U.S. timber sales. Compared to third quarter 2003, earnings were significantly higher, primarily due to tax benefits and improved results for performance fibers, lumber and timber, partially offset by lower land sales.
Lee Nutter, Chairman, President and CEO said: "During the quarter, we experienced continued strong demand in all product areas and completed the $89 million, 83,000-acre Alabama timberland acquisition with internally generated funds. In addition, with our strong cash flow, we have paid $83 million in dividends year to date and ended the quarter with $42 million in cash and equivalents."
Cash provided by operating activities of $234 million in the first nine months was $61 million above the comparable period in 2003. Cash Available for Distribution (CAD) for the same period was $147 million, $36 million above 2003. Stronger cash flow was primarily due to substantially improved operating earnings and lower working capital requirements, partly offset by $20 million in discretionary pension contributions. (CAD is a non-GAAP measure defined and reconciled to GAAP in the attached exhibits.)
Sales of $279 million were $58 million below second quarter but $11 million above third quarter 2003.
Debt at quarter-end of $616 million was essentially unchanged from the second quarter but $3 million below year-end 2003. The debt-to-capital ratio declined to 43.7 percent from 44.1 percent and 46.5 percent at the end of second quarter 2004 and year-end 2003, respectively. The improvement from year-end 2003 was primarily due to the positive impact on shareholders' equity of the first quarter 2004 net tax benefit of 98 cents per share relating to the company's conversion to a REIT.
Timber and Land
Sales of $47 million and operating income of $18 million were $43 million and $38 million below second quarter, respectively, primarily due to lower land and U.S. timber sales. Compared to third quarter 2003, sales and operating income declined $13 million and $15 million, respectively, due to lower land sales partly offset by stronger timber prices. As the company has previously noted, it is normal for land sales to vary significantly from quarter to quarter and year to year given the complexity and timing of selling large tracts.
Performance Fibers
Sales of $143 million were $10 million below second quarter primarily due to timing, partly offset by stronger absorbent materials prices. Operating income of $17 million declined $2 million from second quarter mainly due to increased manufacturing costs, partly offset by improved sales mix and higher absorbent materials prices. Compared to third quarter 2003, sales and operating income increased by $11 million and $15 million, respectively, primarily due to higher cellulose specialties and absorbent materials prices and lower manufacturing costs.
Wood Products
Sales of $44 million and operating income of $4 million were both $1 million below second quarter, but $9 million and $5 million above third quarter 2003, respectively. The improvement over third quarter 2003 was primarily due to stronger lumber prices.
Other Operations
Sales of $46 million and operating income of $1 million decreased $5 million and $1 million, respectively, from second quarter due to lower trading activity and coal revenue. Compared to third quarter 2003, sales and operating income improved $4 million and $1 million, respectively, due to improved trading activity.
Other Items
Corporate expenses of $8 million were $1.7 million below second quarter primarily due to lower incentive compensation expenses and $3 million less than third quarter 2003, mainly due to the absence of REIT conversion costs. During the quarter, the company closed on the $89 million timberland acquisition which was structured as an LKE transaction. The acquisition served as replacement property for $35 million in land sales to third parties, most of which closed in earlier quarters. As a result of the LKE, the company realized tax benefits for the year of $11 million, or 22 cents per share (of which $10 million, or 20 cents per share, was realized in the third quarter). The third quarter LKE benefit, along with a $1.4 million benefit realized upon completion of the 2003 tax return, resulted in a net tax benefit of $3.8 million for the quarter. Through September 30, the annual effective tax rate, before discrete items, was 16.9 percent compared to 23.9 percent for the comparable period in 2003 (see Schedule I). The lower rate for 2004 is the result of tax benefits associated with the company's REIT structure and the recognition of LKE benefits. Last year's level was below the statutory rate primarily due to foreign and other tax credits.
Outlook
Fourth quarter 2004 earnings per share are expected to be well above pro forma fourth quarter 2003 (post the December 2003 special earnings-and-profits stock dividend) primarily due to higher performance fibers and Northwest timber prices, lower performance fibers manufacturing costs and increased land sales. Compared to the third quarter, excluding LKE benefits, earnings are expected to be somewhat lower primarily due to higher performance fibers raw material and energy costs and declining lumber prices, partially offset by increased land sales. Fourth quarter Southeast U.S. timber prices are expected to be lower than third quarter due to hurricane-related market conditions.
Nutter said: "For the first nine months of 2004, prices have improved in all of our businesses and demand has remained strong, especially for our higher value cellulose specialties and Northwest timber. While lumber prices are retreating somewhat, we continue to feel the positive impact of strong underlying demand for housing and remodeling in our timber and wood products businesses. With a strong balance sheet, we continue to explore ways of capitalizing on our REIT structure to further increase long-term shareholder value."
Rayonier has more than 2 million acres of timber and land in the U.S. and New Zealand and is the world's premier supplier of high performance specialty cellulose fibers. Approximately 40 percent of the company's sales are outside the U.S. to customers in more than 50 countries.
Reported results are preliminary and not final until filing of the third quarter 2004 Form 10-Q with the Securities and Exchange Commission and, therefore, remain subject to subsequent event adjustments. Comments about anticipated demand, pricing, volumes, expenses, earnings and land sales are forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The following important factors, among others, could cause actual results to differ materially from those expressed in the forward-looking statements: changes in global market trends and world events; interest rate and currency movements; fluctuations in demand for or supply of cellulose specialties, absorbent materials, timber, wood products or real estate and entry of new competitors into these markets; adverse weather conditions affecting production, timber availability and sales, or distribution; changes in production costs for wood products or performance fibers, particularly for raw materials such as wood, energy and chemicals; unexpected delays in the closing of land sale transactions; changes in law or policy that might limit or restrict the development of real estate, particularly in the southeastern U.S.; the Company's ability to satisfy complex rules in order to qualify as a REIT; the availability of tax deductions and the ability of the company to complete tax-efficient exchanges of real estate; and implementation or revision of governmental policies and regulations affecting the environment, endangered species, import and export controls or taxes, including changes in tax laws that could reduce the benefits associated with REIT status. For additional factors that could impact future results, please see the company's most recent Form 10-K on file with the Securities and Exchange Commission.
A conference call will be held on Thursday, October 28 at 4:15 p.m. EDT to discuss these results. Interested parties are invited to listen to the live webcast by logging onto http://www.rayonier.com and following the link. Supplemental materials will be available at the website. A replay will be available on the site shortly after the call where it will be archived for one month. Also, investors may access the "listen only" conference call by dialing 913-981-5584.
For further information, visit the company's web site at http://www.rayonier.com. Complimentary copies of Rayonier press releases and other financial documents are also available by mail or fax by calling 1-800-RYN-7611.
RAYONIER
FINANCIAL HIGHLIGHTS
SEPTEMBER 30, 2004 (unaudited)
(millions of dollars, except per share information)
Three Months Ended Nine Months Ended
---------------------------- ------------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2004 2004 2003 2004 2003
--------- -------- --------- ------------ ----------
Profitability
Sales $278.9 $336.9 $267.6 $909.5 $829.4
Operating income $ 31.2 $ 70.3 $ 21.7 $144.0 $ 94.9
Net income $ 24.2 $ 43.7 $ 8.1 $143.4 $ 48.0
Net income per
diluted common
share $ 0.47 $ 0.86 $ 0.19 $ 2.82 $ 1.13
Pro forma net
income per
diluted
common
share (a)(b) $ 0.47 $ 0.86 $ 0.16 $ 1.84 $ 0.98
Operating income
as a percent of
sales 11.2% 20.9% 8.1% 15.8% 11.4%
ROE (annualized)
(a)(c) 12.8% 17.4% 0.6% 15.4% 6.8%
Nine Months Ended September 30,
-------------------------------
2004 2003
-------- --------
Capital Resources and Liquidity
Cash provided by
operating activities $ 234.1 $ 172.8
Cash used for
investing activities $(142.8) $ (58.7)
Cash used for
financing activities $ (71.4) $ (46.5)
Cash Available for
Distribution (CAD)(d)(f) $ 146.9 $ 110.5
Adjusted EBITDA (e)(f) $ 271.5 $ 222.2
Repayment of debt, net $ 2.8 $ 32.7
Debt $ 615.5 $ 620.4
Debt / capital 43.7% 44.9%
(a) Nine months ended September 30, 2004 excludes first quarter
reversal of deferred taxes not required after REIT conversion of $77.9
million, or $1.53 per share and additional taxes for repatriation of
foreign earnings of ($28.2) million, or ($0.55) per share, for a net
effect of $49.7 million, or $0.98 per share. See reconciliation on
Schedule G.
(b) 2003 per share data has been restated for the December 19,
2003 15.1% special dividend.
(c) Major land sales and REIT conversion costs are not annualized.
(d) Cash Available for Distribution (CAD) is defined as cash
provided by operating activities less both custodial and discretionary
capital spending and less the tax benefit on the exercise of stock
options. Cash Available for Distribution is a non-GAAP measure of cash
generated during a period that is available for dividend distribution,
repurchase of the Company's common shares, debt reduction and for
strategic acquisitions net of associated financing. See reconciliation
on Schedule G.
(e) Adjusted EBITDA is defined as earnings from continuing
operations before interest expense, income taxes, depreciation,
depletion, amortization and the non-cash cost basis of land sold.
Adjusted EBITDA is a non-GAAP measure of operating cash generating
capacity of the Company. See reconciliation on Schedule H.
(f) Management considers these measures to be important to
estimate the enterprise and shareholder values of the Company as a
whole and of its core segments, and for allocating capital resources.
- A -
RAYONIER
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
SEPTEMBER 30, 2004 (unaudited)
(millions of dollars, except per share information)
Three Months Ended Nine Months Ended
---------------------------- ------------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2004 2004 2003 2004 2003
--------- -------- --------- ------------ ----------
Sales $278.9 $336.9 $267.6 $909.5 $829.4
--------- -------- --------- ------------ ----------
Costs and expenses
Cost of sales 236.5 252.0 231.8 722.9 701.4
Selling and
general
expenses 13.0 14.7 16.1 45.8 39.1
Other
operating
expense
(income) (1.8) (0.1) (2.0) (3.2) (6.0)
--------- -------- --------- ------------ ----------
Operating income 31.2 70.3 21.7 144.0 94.9
Interest expense (11.5) (12.1) (12.1) (34.7) (36.9)
Interest and
miscellaneous
income(expense),
net 0.7 0.4 0.8 1.8 2.3
--------- -------- --------- ------------ ----------
Income before
taxes 20.4 58.6 10.4 111.1 60.3
Income tax
(expense)
benefit (a) 3.8 (14.9) (2.3) 32.3 (12.3)
--------- -------- --------- ------------ ----------
Net income (a) $ 24.2 $ 43.7 $ 8.1 $143.4 $ 48.0
========= ======== ========= ============ ==========
Net income per
Common Share
Basic EPS $ 0.48 $ 0.88 $ 0.19 $ 2.89 $ 1.15
========= ======== ========= ============ ==========
Diluted EPS $ 0.47 $ 0.86 $ 0.19 $ 2.82 $ 1.13
========= ======== ========= ============ ==========
Pro forma net
income per
Common
Share (b)(c)
Adjusted basic
EPS $ 0.48 $ 0.88 $ 0.17 $ 1.88 $ 1.00
========= ======== ========= ============ ==========
Adjusted
diluted EPS $ 0.47 $ 0.86 $ 0.16 $ 1.84 $ 0.98
========= ======== ========= ============ ==========
Weighted average
Common Shares
used for
determining
Basic EPS 49,720,050 49,557,582 42,133,413 49,539,375 41,867,879
========== ========== ========== ========== ==========
Diluted
EPS 51,123,431 50,891,616 42,963,352 50,934,033 42,557,905
========== ========== ========== ========== ==========
(a) Nine months ended September 30, 2004 includes reversal of
deferred taxes not required after REIT conversion of $77.9 million and
additional taxes for repatriation of foreign earnings of ($28.2)
million.
(b) Nine months ended September 30, 2004 excludes reversal of
deferred taxes not required after REIT conversion of $1.58 per basic
share and $1.53 per diluted share and additional taxes for
repatriation of foreign earnings of ($0.57) per basic share and
($0.55) per diluted share, for a net of $1.01 per basic share and
$0.98 per diluted share. See reconciliation on Schedule G.
(c) For the three and nine months ended September 30, 2003 per
share data has been restated for the December 19, 2003 15.1% special
dividend.
- B -
RAYONIER
BUSINESS SEGMENT SALES AND OPERATING INCOME (LOSS)
SEPTEMBER 30, 2004 (unaudited)
(millions of dollars)
Three Months Ended Nine Months Ended
----------------------------- -----------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2004 2004 2003 2004 2003
--------- -------- ---------- ----------- ----------
Sales
Timber and Land
Timber $ 39.2 $ 49.3 $ 32.5 $141.6 $114.6
Land 7.3 40.4 26.8 81.0 97.5
--------- -------- ---------- ----------- ----------
Total Timber
and Land 46.5 89.7 59.3 222.6 212.1
--------- -------- ---------- ----------- ----------
Performance
Fibers
Cellulose
specialties 103.3 107.2 94.3 303.6 273.1
Absorbent
materials 39.4 45.2 37.6 124.4 119.4
--------- -------- ---------- ----------- ----------
Total
Performance
Fibers 142.7 152.4 131.9 428.0 392.5
--------- -------- ---------- ----------- ----------
Wood Products
Lumber 33.2 34.5 24.6 95.3 66.8
MDF 11.0 10.3 11.0 31.2 30.2
--------- -------- ---------- ----------- ----------
Total Wood
Products 44.2 44.8 35.6 126.5 97.0
--------- -------- ---------- ----------- ----------
Other Operations 45.8 50.3 41.6 133.0 129.3
Intersegment
eliminations (0.3) (0.3) (0.8) (0.6) (1.5)
--------- -------- ---------- ----------- ----------
Total sales $278.9 $336.9 $267.6 $909.5 $829.4
========= ======== ========== =========== ==========
Operating income
(loss)
Timber and Land
Timber $ 12.6 $ 20.1 $ 8.5 $ 55.5 $ 36.8
Land 4.9 35.0 23.6 63.6 80.3
--------- -------- ---------- ----------- ----------
Total Timber
and Land 17.5 55.1 32.1 119.1 117.1
Performance
Fibers 16.7 18.4 1.6 41.2 3.1
Wood Products
Lumber 5.2 6.4 0.6 13.0 (3.5)
MDF (1.3) (1.2) (1.4) (3.2) (1.6)
--------- -------- ---------- ----------- ----------
Total Wood
Products 3.9 5.2 (0.8) 9.8 (5.1)
--------- -------- ---------- ----------- ----------
Other Operations 0.8 1.9 (0.3) 5.0 (1.1)
Corporate (8.0) (9.7) (11.0) (30.9) (23.9)
Intersegment
eliminations
and other
(Including
Corporate FX) 0.3 (0.6) 0.1 (0.2) 4.8
--------- -------- ---------- ----------- ----------
Total
operating
income $ 31.2 $ 70.3 $ 21.7 $144.0 $ 94.9
========= ======== ========== =========== ==========
- C -
RAYONIER
CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CASH FLOWS
SEPTEMBER 30, 2004 (unaudited)
(millions of dollars)
CONDENSED CONSOLIDATED BALANCE SHEETS
September 3O , December 31,
2004 2003
------------- ------------
Assets
Current assets $ 281.3 $ 244.6
Timber, timberlands and logging roads,
net of depletion and amortization 1,057.4 994.8
Property, plant and equipment 1,434.7 1,414.5
Less accumulated depreciation 973.3 912.3
------------- ------------
461.4 502.2
------------- ------------
Other assets 114.5 97.1
------------- ------------
$ 1,914.6 $ 1,838.7
============= ============
Liabilities and Shareholders' Equity
Current liabilities $ 200.7 $ 147.3
Deferred income taxes 71.4 121.8
Long-term debt 611.9 614.9
Non-current reserves for dispositions
and discontinued operations 132.0 140.2
Other non-current liabilities 106.2 103.4
Shareholders' equity 792.4 711.1
------------- ------------
$ 1,914.6 $ 1,838.7
============= ============
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
----------------------------
September 30, September 30,
2004 2003
------------- -------------
Cash provided by operating activities:
Net Income $ 143.4 $ 48.0
Depreciation, depletion, amortization
and non-cash cost basis of land sold 125.6 125.1
Other non-cash items included in income (46.3)(1) 6.8
Changes in working capital and other
assets and liabilities 11.4 (7.1)
------------- ------------
234.1 172.8
------------- ------------
Cash used for investing activities:
Capital expenditures, net of
sales and retirements (53.6) (53.3)
Purchase of assets previously leased - (5.4)
Purchase of Alabama timberlands (89.2) -
------------- ------------
(142.8) (58.7)
------------- ------------
Cash used for financing activities:
Repayment of debt, net (2.8) (32.7)
Dividends paid (83.3) (32.9)
Shares issued 14.7 19.1
------------- ------------
(71.4) (46.5)
------------- ------------
Effect of exchange rate changes on cash 0.3 (0.1)
------------- ------------
Cash and cash equivalents:
Increase in cash and cash equivalents 20.2 67.5
Balance, beginning of year 21.4 18.9
------------- ------------
Balance, end of period $ 41.6 $ 86.4
============= ============
(1) Mainly reversal of deferred taxes not required after REIT
conversion of ($77.9) million and additional taxes for repatriation of
foreign earnings of $28.2 million.
- D -
RAYONIER
SELECTED SUPPLEMENTAL FINANCIAL DATA
SEPTEMBER 30, 2004 (unaudited)
(millions of dollars)
Three Months Ended Nine Months Ended
----------------------------- -----------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2004 2004 2003 2004 2003
--------- -------- ---------- ----------- ----------
Geographical Data
(Non-U.S.)
Sales
New Zealand $23.3 $24.3 $23.0 $67.4 $63.5
Other 7.1 9.4 1.7 22.5 9.2
--------- -------- ---------- ----------- ----------
Total $30.4 $33.7 $24.7 $89.9 $72.7
========= ======== ========== =========== ==========
Operating income
(loss)
New Zealand $2.0 $0.2 $0.6 $1.2 $3.8
Other (1.0) (0.5) (0.6) (2.0) (1.5)
--------- -------- ---------- ----------- ----------
Total $1.0 $(0.3) $ - $(0.8) $2.3
========= ======== ========== =========== ==========
Timber
Sales
Northwest
U.S. $17.0 $22.0 $8.9 $63.2 $44.2
Southeast
U.S. 14.9 20.6 18.3 59.0 56.0
New Zealand 7.3 6.7 5.3 19.4 14.4
--------- -------- ---------- ----------- ----------
Total $39.2 $49.3 $32.5 $141.6 $114.6
========= ======== ========== =========== ==========
Operating income
Northwest
U.S. $ 8.0 $11.9 $ 1.6 $ 33.8 $ 21.5
Southeast
U.S. 2.7 6.2 4.0 17.2 12.1
New Zealand 1.9 2.0 2.9 4.5 3.2
--------- -------- ---------- ----------- ----------
Total $12.6 $20.1 $ 8.5 $ 55.5 $ 36.8
========= ======== ========== =========== ==========
Adjusted EBITDA by
Segment
Timber and
Land $30.1 $73.6 $48.1 $173.6 $174.2
Performance
Fibers 37.2 39.1 22.0 100.8 61.8
Wood Products 8.3 9.2 2.8 21.6 4.5
Other Operations 1.2 2.4 (0.1) 5.9 (0.6)
Corporate and
other (7.3) (10.5) (10.8) (30.4) (17.7)
--------- -------- ---------- ----------- ----------
Total $69.5 $113.8 $62.0 $271.5 $222.2
========= ======== ========== =========== ==========
- E -
RAYONIER
SELECTED OPERATING INFORMATION
SEPTEMBER 30, 2004 (unaudited)
Three Months Ended Nine Months Ended
----------------------------- -----------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2004 2004 2003 2004 2003
--------- -------- ---------- ----------- ----------
Timber and Land
Sales volume -
Timber
Northwest U.S.,
in millions
of board feet 61 81 34 230 178
Southeast U.S.,
in thousands
of short
green tons 842 1,140 1,150 3,231 3,488
New Zealand,
in thousands
of metric tons 173 158 187 437 446
Timber sales
volume -
Intercompany
Southeast U.S.,
in thousands
of short
green tons 8 21 19 29 24
New Zealand,
in thousands
of metric tons 7 - 40 7 85
Acres sold 2,173 4,796(1) 5,745 24,019(1) 37,868
Performance Fibers
Sales Volume
Cellulose
specialties,
in thousands
of metric
tons 112 115 109 328 314
Absorbent
materials,
in thousands
of metric tons 61 75 62 204 209
Production as a
percent of
capacity 98.5% 99.8% 97.6% 98.9% 97.2%
Wood Products
Lumber sales
volume, in
millions of
board feet 87 91 78 261 222
Medium-density
fiberboard sales
volume, in
thousands of
cubic meters 41 40 49 120 131
(1) Excludes 5,487 acres associated with a Northeast Florida sale
($26 million) of timber lease rights.
- F -
RAYONIER
RECONCILIATION OF NON-GAAP MEASURES
SEPTEMBER 30, 2004 (unaudited)
(millions of dollars, except per share information)
Nine Months Ended
----------------------------
September 30, September 30,
2004 2003
------------- -------------
Cash Available for Distribution (CAD)
Cash provided by operating activities $234.1 $172.8
Capital spending (a) (53.6) (53.3)
Purchase of assets previously leased - (5.4)
Like-kind exchange tax benefits on
third party land sales (b) (9.9) -
Like-kind exchange tax benefits on
intercompany land sales (b) (20.2) -
Tax benefit on exercise of stock options (3.5) (3.6)
------------- -------------
Cash Available for Distribution (CAD) $146.9 $110.5
============= =============
(a) Capital Spending is net of proceeds from sales and
retirements.
(b) Represents taxes that would have been paid if the Company had
not completed LKE transactions.
Three Months Ended Nine Months Ended
----------------------------- -----------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2004 2004 2003 2004 2003
--------- -------- ---------- ----------- ----------
Net income per
Common Share
Basic EPS $0.48 $0.88 $0.19 $2.89 $1.15
========= ======== ========== =========== ==========
Diluted EPS $0.47 $0.86 $0.19 $2.82 $1.13
========= ======== ========== =========== ==========
Deferred taxes
not required
after REIT
conversion
Basic EPS - - - (1.58) -
========= ======== ========== =========== ==========
Diluted EPS - - - (1.53) -
========= ======== ========== =========== ==========
Additional taxes for
repatriation of
foreign earnings
Basic EPS - - - 0.57 -
========= ======== ========== =========== ==========
Diluted EPS - - - 0.55 -
========= ======== ========== =========== ==========
Impact of
December 19,
2003 15.1%
special
dividend
Basic EPS - - (0.02) - (0.15)
========= ======== ========== =========== ==========
Diluted EPS - - (0.03) - (0.15)
========= ======== ========== =========== ==========
Pro forma net
income per Common
Share
Adjusted basic
EPS 0.48 0.88 0.17 1.88 1.00
========= ======== ========== =========== ==========
Adjusted
diluted EPS 0.47 0.86 0.16 1.84 0.98
========= ======== ========== =========== ==========
- G -
RAYONIER
RECONCILIATION OF NON-GAAP MEASURES (1)
SEPTEMBER 30, 2004 (unaudited)
(millions of dollars)
Timber Corporate
and Performance Wood Other and
Land Fibers Products Operations other Total
------ ----------- -------- ---------- --------- -----
Adjusted
EBITDA
Three Months
Ended
September 30,
2004
Cash provided
by operating
activities $26.9 $47.0 $9.1 $6.3 $(12.9) $76.4
Income tax
benefit - - - - (3.8) $(3.8)
Interest
expense - - - - 11.5 $11.5
Working
capital
increases
(decreases) (0.1) (9.5) (0.7) (5.2) (6.3) (21.8)
Other
balance
sheet
changes 3.3 (0.3) (0.1) 0.1 4.2 7.2
------- ------- -------- ------ ------ -----
Adjusted
EBITDA $30.1 $37.2 $8.3 $1.2 $(7.3) $69.5
======= ======= ======== ====== ====== =====
June 30, 2004
Cash provided
by operating
activities $80.0 $30.6 $8.0 $(0.7) $(42.2) $75.7
Income tax
expense - - - - 14.9 $14.9
Interest
expense - - - - 12.1 $12.1
Working
capital
increases
(decreases) (3.6) 8.3 1.2 3.3 4.3 13.5
Other
balance
sheet
changes (2.8) 0.2 - (0.2) 0.4 (2.4)
------- ------- -------- ------ ------ -----
Adjusted
EBITDA $73.6 $39.1 $9.2 $2.4 $(10.5) $113.8
======= ======= ======== ====== ====== =====
September 30,
2003
Cash provided
by operating
activities $63.7 $14.4 $3.1 $(0.5) $(16.7) $64.0
Income tax
expense - - - - 2.3 $2.3
Interest
expense - - - - 12.1 $12.1
Working
capital
increases
(decreases) (11.0) 7.9 (0.2) 0.4 (14.8) (17.7)
Other
balance
sheet
changes (4.6) (0.3) (0.1) - 6.3 1.3
------- ------- -------- ------ ------ -----
Adjusted
EBITDA $48.1 $22.0 $2.8 $(0.1) $(10.8) $62.0
======= ======= ======== ====== ====== =====
Nine Months
Ended
September 30,
2004
Cash provided
by operating
activities $180.9 $93.3 $18.5 $12.2 $(70.8) $234.1
Income tax
benefit - - - - (32.3) (32.3)
Interest
expense - - - - 34.7 34.7
Working
capital
increases
(decreases) (11.5) 6.4 3.3 (5.7) (19.4)(a)(26.9)
Other
balance
sheet
changes 4.2 1.1 (0.2) (0.6) 57.4(b) 61.9
------- ------- -------- ------ ------ -----
Adjusted
EBITDA $173.6 $100.8 $21.6 $5.9 $(30.4) $271.5
======= ======= ======== ====== ====== ======
September 30,
2003
Cash provided
by operating
activities $193.5 $51.5 $1.3 $5.7 $(79.2) $172.8
Income tax
expense - - - - 12.3 12.3
Interest
expense - - - - 36.9 36.9
Working
capital
increases
(decreases) (12.4) 10.8 3.4 (6.7) 10.2 5.3
Other
balance
sheet
changes (6.9) (0.5) (0.2) 0.4 2.1 (5.1)
------- ------- -------- ------ ------ -----
Adjusted
EBITDA $174.2 $61.8 $4.5 $(0.6) $(17.7) $222.2
======= ======= ======== ====== ====== ======
(1) Unusual, non-trade intercompany items between the segments
have been eliminated.
(a) Mainly higher taxes and interest.
(b) Includes reversal of deferred taxes not required after REIT
conversion partly offset by additional taxes for repatriation of
foreign earnings.
- H -
RAYONIER
RECONCILIATION OF STATUTORY INCOME TAX TO REPORTED INCOME TAX
SEPTEMBER 30, 2004 (unaudited)
(millions of dollars, except percentages)
Three Months Ended
-----------------------------------------------
September 30, June 30, September 30,
2004 2004 2003
------------- ------------- -------------
$ % $ % $ %
------------- ------------- -------------
Income tax
provision
at the
U.S.
statutory
rate $7.1 35.0 $20.6 35.0 $3.6 35.0
REIT income
not subject
to federal
tax (9.7) (47.6) (14.2) (24.2) - -
Lost deduction
on REIT
interest
expense
and overhead
expenses
associated
with REIT
activities 1.7 8.4 6.5 11.3 - -
State and
local
income taxes,
foreign
exchange
rate changes
and
permanent
differences (3.1) (15.5) 3.6 6.1 (1.6) (15.2)
----- ------ ------ ----- ----- ------
Income tax
(benefit)
expense
before
discrete
items (1) $(4.0) (19.7) $16.5 28.2 $2.0 19.8
Exchange
rate
changes
on tax on
undistributed
foreign
earnings 1.6 7.9 (1.6) (2.8) - -
Return to
accrual
adjustment (1.4) (6.8) - - 0.3 2.4
Tax benefit
from interim
partial IRS
audit
settlement - - - - - -
---- ---- ---- ---- ---- -----
Income tax
(benefit)
expense (1) $(3.8) (18.6) $14.9 25.4 $2.3 22.2
====== ====== ===== ==== ==== ====
Nine Months Ended
---------------------------------
September 30, September 30,
2004 2003
------------- -------------
$ % $ %
------------- -------------
Income tax provision
at the U.S. statutory
rate $38.9 35.0 $21.1 35.0
REIT income not
subject to federal tax (30.8) (27.8) - -
Lost deduction on
REIT interest expense
and overhead expenses
associated with REIT
activities 10.0 9.1 - -
State and local
income taxes,
foreign exchange
rate changes and
permanent differences 0.7 0.6 (6.8) (11.1)
------ ------ ----- -----
Income tax (benefit)
expense before discrete
items (1) $18.8 16.9 $14.3 23.9
Exchange rate changes
on tax on undistributed
foreign earnings - - - -
Return to accrual
adjustment (1.4) (1.2) 0.3 0.4
Tax benefit from
interim partial
IRS audit settlement - - (2.3) (3.9)
------ ------ ----- -----
Income tax (benefit)
expense (1) $17.4 15.7 $12.3 20.4
====== ====== ===== =====
(1) Nine months ended September 30, 2004 exclude first quarter
reversal of deferred taxes not required after REIT conversion of
($77.9) million and additional taxes for repatriation of foreign
earnings of $28.2 million.
- I -
CONTACT:
Rayonier, Jacksonville
Media Contact:
Jay Fredericksen, 904-357-9106
or
Investor Contact:
Parag Bhansali, 904-357-9155
SOURCE: Rayonier
